Dubai Debt Plan May Be ‘Negative’ for Banks, JPMorgan Says

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Dubai World’s debt restructuring plan may be “negative” for its bank creditors as they will have to rely on asset sales and dividends for principal repayment, JPMorgan Chase & Co. said.

Dubai World, a state-owned holding company, is asking creditors to wait as many as eight years to receive all their money back as part of its $23.5 billion debt restructuring plan announced last week.

“There is no mention of a government repayment guarantee for Dubai World’s bank creditors,” Zafar Nazim, a London-based analyst at the bank, wrote in a report dated March 25.

“The government intends to inject only $1.5 billion cash into Dubai World to support its creditors and working capital commitments,” JPMorgan said. “In essence, Dubai World’s creditors will be relying upon assets sales and dividends for eventual principal repayment.”END